Energy Politics

Introduction

Introduction It is not uncommon to hear leaders and states criticized for ‘‘mixing oil and politics.’’ Indeed, a standard criticism of the U.S.-led war in Iraq is ‘‘it is just about oil.’’ In assessing the merit of various pipeline and energy production projects, companies and governments are warned to stick to ‘‘commercial considerations.’’ A 2003 joint United Nations Development Programme (UNDP)/World Bank report on cross-border oil and gas pipelines proposed as one of its main recommendations that projects should be ‘‘driven by commercial considerations.’’1 The United States and Europe have warned Russia and other energy exporting states to separate energy from their foreign relations. German foreign minister Walter Steinmeier warned that ‘‘Energy must not become the currency of power in international politics.’’2 U.S. vice president Dick Cheney, referring to Moscow’s behavior in its energy trade with its neighbors, noted that ‘‘No legitimate interest is served when oil and gas become tools of intimidation or blackmail, either by supply manipulation or attempts to monopolize transportation.’’3 Clearly, when exporters overtly use energy exports as a tool to promote their foreign policy goals, Europe and the United States regularly decry the use of energy as a ‘‘weapon’’ rather than accept it as a standard and legitimate tool of foreign policy. This book claims otherwise: energy and politics are intrinsically interlinked . A country’s ability to access energy supplies and the ways in which it uses energy crucially determine the state of its economy, its national security, and the quality and sustainability of its environment. The prevailing lifestyle and structure of global society today is that of ‘‘hydrocarbon man’’—and the way hydrocarbon man produces goods, wages war, and even finds entertainment is dependent on regular access to fossil fuels. Moreover, for energy exporters and important energytransit states, energy supply policy is as much a part of the policy arsenal as other economic tools, military power, and diplomatic tactics. States are no more likely to refrain from using energy to promote their policy goals than to ignore economic or military means of doing so. These 2 Introduction states have particular leverage in a tight world oil market, since oil prices are especially sensitive to political developments. Oil prices can also be affected by domestic developments as well as intentional foreign policy strategies. For example, political revolutions, even if they do not harm any individuals or cause sustained damage to production or export, often lead to oil price spikes with international economic ramifications. In fact, political factors significantly affect the commercial viability of energy production and infrastructure projects. One of the major components of the cost of a project can be compensating for the perceived risk. A regime’s political orientation and stability, how likely it is to respect signed contracts, and its propensity to become embroiled in regional conflict are all inherently political factors that signi ficantly impact the price tag and perceived worthiness of an energy project. In addition, infrastructure projects link states and reflect relations. Thus, states in choosing routes to export their commodities and import their energy supplies naturally consider and promote the political rami- fications of various route options. Decisions on natural gas export projects are especially likely to be affected by political considerations because they can be quite risky. Investors have to wait a long time before receiving a return on their investment, and such projects involve immense sunk costs. Yet once construction begins, investors have little leverage vis-à-vis the host state. Not surprisingly, regime stability and orientation play a paramount role in deciding where to develop natural gas projects. Indeed, there are interesting examples of neighboring states, such as Iran and Qatar, that sit on common natural gas fields, yet one has succeeded in developing its resources and the other has not. The growing perception of climate change as a potential security threat to states around the globe has also helped turn energy use policy into a major foreign policy and even national security issue. Politics likewise influences the realm of decisions about what energy-related scienti fic research to pursue. As will be seen in the case of U.S. energy policy, which nonfossil fuels development receives government funding is largely determined by domestic political considerations, such as winning the support of corn-growing states by encouraging development of cornbased ethanol. In addition, energy policies require trade-offs—for example , nuclear energy may be useful to combat climate change but may...